Experts believe that money laundering is the core factor behind financial-oriented crimes, even for procession of illegal cryptocurrency-based transactions. It is believed that the motive behind money laundering of cryptocurrencies is to avoid traceability of its original criminal source and for it to be exchanged for cash, as stated by Chainalysis.
According to Chainalysis, in 2022, illegal addresses transacted around $23.8 billion worth cryptocurrency, which showed a 68% increase from 2021. Mainstream centralised exchanges (CEXs) are considered the biggest recipient of illicit cryptocurrency. More illegitimate funds were processed for decentralised finance (DeFi) protocols, which began in 2020. Hackers having hacked cryptocurrency are considered the only category sending maximum funds to DeFi protocols, at 57%.
On the basis of information by Chainalysis, 2022 witnessed cybercriminals being responsible for increasing utilisation of DeFi protocols for money laundering. Reports suggest that DeFi protocols were targeted for these hacks in 2022. Besides hackers, crypto offenders send almost their entire funds to centralised exchanges (CEXs). However, more than 40% of illegal funds are sent first to intermediary services, which come from ransomware, darknet market, and hacker addresses.
Moreover, Chainalysis noted that crypto criminals employed crypto mixers, and took in eight percent of total funds sent from illicit addresses in 2022. In May, 2022, OFAC permitted a mixer for the first time when it designated Blender.io in its contribution towards laundering cryptocurrency hacked by North Korea’s Lazarus Group. Reportedly, crypto mixers clocked $7.8 billion in 2022, of which 24% was sent from illegal addresses. Other sanctioned platforms and darknet markets also constituted shares of value received by mixers in 2022.
(With insights from Chainalysis)